Where can the average person find a cash generator that produces 20 percent over the long-term? Of course, the stock market is the correct answer. But first, we need to define exactly what a stock market is. 

A stock market is a public auction place where company stock is exchanged between buyers and sellers. The New York Stock Exchange (NYSE), the Nasdaq stock market, and the American Stock Exchange (AMEX) are the main stock exchanges in the United States. Stocks of large companies are primarily traded on the NYSE. Stocks of small companies are traded on the Nasdaq. Indexes have been introduced to track the average stock-price fluctuations in the individual stock exchanges. A stock index is the stock-price average of a defined group of publicly traded stocks. The most famous and oldest stock market index is the Dow Jones Industrial Average (DOW or DJIA), which consists of 30 companies traded on the NYSE. Of course, there is the Nasdaq 100 as well. Another average, or index is the Standard and Poors 500 (S&P 500 Index), which consists of 500 companies traded on the major U.S. stock exchanges.

The list goes on and on. These indexes track general market trends. When the indexes are declining from one day to the next, there are more sellers of stock than there are buyers. The reverse is true when the indexes climb from day to day. The bulls are in control. Bulls are net buyers of stocks and bears are net sellers of stocks. The stock market is driven by fear and greed. The bulls represent greed and the bears fear.

It is widely expected that the S&P 500 most realistically reflects general market conditions because it consists of 500 stocks traded on several stock exchanges. This index has yielded approximately 12.7% over the last 30 years.  Nevertheless, you will hear everyone talk about the DOW on the news when they refer to the stock market. Reporters rarely discuss the S&P 500; however, this index is considered the benchmark to which all yields are compared.